Slow U.S. economic growth bodes ill for Florida’s recovery

Jeff Ostrowski @bio561

Friday

Jul 27, 2012 at 12:01 AMJul 28, 2012 at 1:44 AM

U.S. economic growth slowed to a crawl in the second quarter, a tepid showing that doesn’t bode well for Florida’s recovery.

Gross domestic product, the value of all goods and services produced in the nation, rose at a 1.5 percent annual rate in the second quarter, the Commerce Department said Friday. That followed a 2 percent gain in the first quarter and a 3 percent jump in the fourth quarter.

Household purchases, which make up about 70 percent of the U.S. economy, grew at the weakest pace in a year. With the economy stalled, job growth has been sluggish. Economists say the economy needs to grow at a pace of about 2.5 percent for unemployment to go down.

Typically, Florida’s economy creates jobs at a pace of 200,000 a year after a recession, said economist Tony Villamil, dean of the business school at St. Thomas University in Miami. But in the aftermath of the Great Recession, job creation has been much slower than in the past.

"It’s a very strange recovery," Villamil said. "It’s not what we’re used to."

Florida’s unemployment rate was 8.6 percent in May and June, while the national jobless rate was stuck at 8.2 percent both months.

"We have an anemic recovery with really no momentum," said Julia Coronado, chief economist for North America at BNP Paribas in New York. "It’s reflective of uncertainty in the global outlook."

That shaky global picture includes Europe’s recession and slowing growth in Brazil. The slowdown in international economies is bad news for Miami-Dade and Broward counties, which rely on global trade and foreign investment in real estate.

While Palm Beach County doesn’t depend as much on foreign markets, it’s not helped by slow growth in the United States. The county long experienced steady population growth as people moved here from other parts of the country, but that flood of migrants has slowed to a trickle in recent years.

"It’s very difficult for people to sell their homes, to change their employment," Villamil said.

Despite the weak report, stocks rose on Friday as investors expected more stimulus from the Federal Reserve and the European Central Bank. The Dow Jones industrial average climbed 187.73 points, or 1.5 percent, to 13,075.70, its highest closing level since May.

Another report Friday showed consumer confidence in July dropped to the lowest level this year. The Thomson Reuters/University of Michigan index fell to 72.3 this month from 73.2 in June.

That all adds up to the slowest rebound for the U.S. economy in 65 years.

"This is the weakest recovery in the post-war period," Villamil said.

Villamil predicted slow growth for the rest of the year. But not all economists are so pessimistic.

"The U.S. economy is struggling, but I’m pretty sure the pace is going to pick back up," said Craig Alexander, chief economist at TD Bank. "Last year, we had an economic slowdown as well, and a lot of pundits were saying there was a 40 to 50 percent chance that the U.S. was going to go back into recession."

That recession didn’t materialize. Instead, economic growth spiked to 3 percent in the fourth quarter before falling in the first half of this year.

Alexander sees Florida’s economy recovering more quickly than the rest of the nation.

"Having fallen farther faster, it has more scope to bounce back," Alexander said.

There’s no official reading of Florida’s gross domestic product for the second quarter. But one sign — taxable sales — points up. Florida’s taxable sales jumped 6 percent in May compared to a year ago, after a 4.1 percent increase in April, according to the Florida Legislature’s Office of Economic & Demographic Research.

With job growth a major issue in the presidential election, a sputtering economy hurts President Obama’s chances of being reelected in November.

"It certainly doesn’t help the president," said Brad Coker of Mason-Dixon Research. "To the extent that it helps Romney, it continues to feed the narrative he’s trying to build that the current policies aren’t helping the economy."

Next week’s unemployment report is likely to be watched more closely by voters than Friday’s GDP release, Coker said.

"The unemployment numbers are going to be far more important, because people understand unemployment more than they understand gross domestic product," he said.

Obama and Romney are in a dead heat in Florida, according to a Mason-Dixon poll, and the outcome of the election could be determined by the direction of the unemployment rate in the next three months.

"If we see a deterioration in the job market, it’s going to be a major setback for Obama," Alexander said.

Bloomberg News contributed to this story.

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